"Sample Operating Agreement for Llcs"
ALI-ABA Course of Study Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities, and Bankruptcy July 16 - 18, 2009 Chicago, Illinois TABLE OF CONTENTS Page PROGRAM xi FACULTY PARTICIPANTS xv STUDY MATERIALS 1. Overview of Substantive Law Governing Partnerships and Limited 1 Liability Companies By Michael K. Pierce Table of Contents 2 Presentation Slides 49 2. Formation of the Partnership 85 By Jere D. McGaffey 3. Partnership Liabilities: Nonrecourse Deductions and Section 704(c) 129 By H. Karl Zeswitz, Jr. Table of Contents 130 Study Materials 137 Presentation Slides 224 4. Partnership Allocations - Introduction 249 By Robert R. Casey, Kelly M. Bender, and John T. Alberts Submitted by Steven G. Frost Table of Contents 251 Study Materials 253 5. Real Estate Workouts - A Step by Step Analysis 311 By Michael G. Frankel, David A. Miller, and Thayne T. Needles Table of Contents 312 Study Materials 319 6. The Financially Distressed Partnership and the Tax Consequences of 419 Workouts By Todd R. Golub and David A. Miller Presentation Slides 421 7. Bankruptcy Issues in Partnership and Limited Liability Company Cases 447 By T. Randall Wright and Joyce A. Dixon Table of Contents 449 Study Materials 451 vii 8. Joint Venture, Partnership and LLC Operating Agreements: Practical 475 Problems, Drafting Solutions By H. Edward Hales, Jr. Table of Contents 477 Identifying Important Issues 478 Presentation Slides 488 Selected Provisions of Delaware LLC Act 509 9. Sample Documents Accompanying Joint Venture Partnership and LLC 535 Operating Agreements By H. Edward Hales, Jr. Sample Documents Index 538 Sample Documents 540 10. Mediation of Partnership/LLC Disputes 975 By Teresa Frisbie Presentation Slides 977 11. Securities Law Aspects of Partnerships, LLCs, and LLPs 1003 By George S. Yearsich, Gail A. Pierce, and Nabeel R. Cheeme Table of Contents 1004 Study Materials 1005 12. Ethics and the Internal Revenue Service 1237 By Richard A. Shaw Submitted by Thomas E. Rutledge Table of Contents 1239 Study Materials 1245 Presentation Slides 1321 13. No Good Deed Goes Unpunished: Pitfalls for Counsel to a Business 1337 Organization About to be Governed by a New Law By Thomas E. Rutledge and Phuc H. Lu 14. Dispute Resolution Partnerships, LLCs & LLCs-supplemental material 1365 By Denise Olrich 15. Dispute Resolution Partnerships, LLCs & LLCs-PP supplemental 1385 material By Denise Olrich 16. Allocations of Partnership Income, Gains, Losses and Deductions & 1405 Series LLCs-supplemental material By Steven G. Frost 17. Key Issues in Partnership and LLC Bankruptcies-supplemental 1433 material By T. Randall Wright 18. Partnership Liabilities, Nonrecourse Deductions and Section 1485 704(c)-supplemental material By H. Karl Zeswitz, Jr. viii 19. Joint Venture Partnership and LLC Operating 1545 Agreements-supplemental material By H. Edward Hales, Jr. 20. LLCs - The Swiss Army Knife of Business Organizations-supplemental 1609 material By Stuart Levine 21. Operating Agreement of Flying Solo, LLC-supplemental material 1639 By Stuart Levine ix 2 ALI-ABA Course of Study Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities, and Bankruptcy July 16-18, 2009 Chicago, Illinois PROGRAM THURSDAY, JULY 16, 2009 8:00 a.m. Registration and Networking Session WEBCAST SEGMENT A 9:00 a.m. Introductory Remarks and Course Overview - Mr. Levine 9:10 a.m. The Substantive Law of Partnerships and LLCs: Special Problems of Partnerships and LLCs, Including Fiduciary Duty Issues - Mr. Pierce A review and discussion of the fundamentals of partnership and LLC law under the uniform acts and the common law, with particular attention to partners' fiduciary responsibilities 10:30 a.m. Networking Break 10:45 a.m. The Substantive Law (cont.) 11:30 a.m. Forming the Partnership: Tax Planning and Problems – Mr. McGaffey Examination of the check-the-box regulations to classify an entity as a partnership; the effect upon the partner and the partnership of transfers of appreciated property to the partnership, as to gain, holding period, and basis; basic treatment of an assumption of a liability by the partnership; treatment of organizational expenses; examination of the possible taxation of a partner on a receipt of a profits interest; gift taxes on partnership transfers; family limited partnerships 12:15 p.m. Lunch Break WEBCAST SEGMENT B 1:45 p.m. Allocations of Partnership Income, Gains, Losses, and Liabilities – Ms. Wilson and Mr. Frost Introduction to capital accounts and basic allocation and distribution concepts; explanation of "outside" basis, loss deduction limitations, and the effect of contributions, distributions, allocations of profits and loss, and allocations of partnership liabilities; overview of determinations of partnership profits and losses and basic section 704(b) rules dealing with whether or not an allocation of partnership income, gain, loss, and specially allocated items of income and deduction will be respected for income tax purposes, with particular emphasis on the "substantial economic effect" safe harbor and the capital account maintenance rules; analysis of differences between recourse and nonrecourse partnership debt and the manner in which partners bear the economic risk of loss for recourse debt, with discussion of the "constructive liquidation" test; discussion of the rules pertaining to allocations of nonrecourse liabilities, deductions attributable to nonrecourse debt, and distributions of proceeds of nonrecourse debt; examination of the effect on allocations of profits and losses of variations in partners' interests during the tax year and section 706(d) restrictions on retroactive allocations; examination of the section 704(c) rules dealing with allocations of depreciation, amortization, depletion, and gains and losses with respect to assets contributed to the partnership, with attention to the traditional and other methods for allocating tax items under section 704(c) 3:15 p.m. Networking Break xi 3:30 p.m. The Financially Distressed Partnership and the Tax Consequences of Workouts - Messrs. Golub and Wright Examination of recent developments in the area of partnership and real estate workouts, including new regulations and revenue rulings addressing the scope of the doctrine of cancellation of indebtedness income and the exceptions under Section 108; analysis of partnership debt for equity transactions; overview of the effect of bankruptcy laws on partners and partnerships; the emerging issue of fiduciary duties owed to creditors 5:30 p.m. Questions and Answers 6:00 p.m. Adjournment for the Day FRIDAY, JULY 17, 2009 8:00 a.m. Networking Session WEBCAST SEGMENT C 8:30 a.m. Liability Limited Companies: The Swiss Army Knife and How To Use It - Mr. Levine LLCs, particularly one-member LLCs, offer new and important tax and business planning possibilities. This session looks at the uses of one- member LLCs, compares LLCs with other forms of business entities and methods of adapting traditional planning devices, and examines emerging issues like serial LLCs and asset protection. Federal and state tax issues are discussed. An annotated one-member LLC operating agreement is provided. 9:30 a.m. Partnership and LLC Agreements - Messrs. Frost, Hales, and Levine This panel analyzes sample forms of partnership agreements and LLC operating agreements (forms supplied) and comments on drafting issues for limited liability companies. The faculty emphasizes practical problems encountered in translating the clients' sometimes unarticulated goals onto paper and dealing with "hidden" issues that the clients may not even have realized that they will face. It discusses the myriad ways that the deal can break down. 10:15 a.m. Networking Break 10:30 a.m. Partnership and LLC Agreements (cont.) 11:30 a.m. Stormy Weather: Dispute Resolution in the Context of Partnerships and LLCs - Mss. Frisbie and Olrich Litigation, arbitration, and mediation: Derivative actions, forced dissolutions and fiduciary duty issues 12:30 p.m. Lunch Break WEBCAST SEGMENT D 1:45 p.m. Questions and Answers 2:15 p.m. Stormy Weather (cont.) 3:15 p.m. Networking Break 3:30 p.m. The Purchase, Sale, Exchange, and Retirement of Partnership Interests and Termination of Partnerships – Mr. Rutledge An analysis of federal tax issues and planning opportunities in acquiring and disposing of interests in partnerships and LLCs through sales (including installment transactions), exchanges, retirements, gifts, and decedent transfers; an examination of tax planning techniques used for reorganizations involving partnerships and conversions of partnerships to corporations, with evaluation of both the sellers' and the purchasers' perspectives 4:45 p.m. Questions and Answers 5:00 p.m. Adjournment for the Day xii SATURDAY, JULY 18, 2009 8:00 a.m. Networking Sessions WEBCAST SEGMENT E 8:30 a.m. Securities Law Aspects - Mr. Yearsich A partnership interest may not be thought to be a security subject to the federal and state securities laws, but frequently it is. It is alleged that every limited partnership interest is a security. Can a general partnership or LLC interest also be a security? The faculty discusses registration requirements, exemptions from registration, resales of partnership and LLC interests, anti-fraud provisions, reporting requirements, and other considerations under the securities laws. 10:45 a.m. Networking Break 11:00 a.m. Ethical Issues - Mr. Rutledge Ethical standards applicable to tax practice are examined, including ethical considerations and limits in rendering tax advice and taking return positions (including Circular 230 compliance). Conflict of interest issues, duties to partners of an attorney representing a partnership, and the obligations of an attorney when a partnership first falls into financial distress also are addressed. 12:30 p.m. Questions and Answers 1:00 p.m. Adjournment xiii 2 ALI-ABA Course of Study Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities, and Bankruptcy July 16-18, 2009 Chicago, Illinois PLANNING CHAIR Stuart Levine, Esquire 29 West Susquehanna Avenue Baltimore, MD 21204 FACULTY Teresa F. Frisbie, Esquire Michael K. Pierce, Esquire DeGrand & Wolfe P.C. Thompson & Knight LLP 20 South Clark Street Suite 3300 Chicago, IL 60603 333 Clay Street Houston, TX 77002 Steven G. Frost, Esquire Senior Counsel Thomas E. Rutledge, Esquire Office of Tax Legislative Counsel Stoll Keenon Ogden PLLC U.S. Department of the Treasury PNC Plaza 1500 Pennsylvania Avenue, NW Suite 2000 Washington, DC 20220 500 West Jefferson Street Louisville, KY 40202-2828 Todd D. Golub, Esquire Baker & McKenzie LLP Amanda Ferguson Wilson, Esquire One Prudential Plaza Sutherland Asbill & Brennan LLP 130 E. Randolph Street 999 Peachtree Street, NE Chicago, IL 60601 Atlanta, GA 30309-3996 H. Edward Hales, Jr., Esquire T. Randall Wright, Esquire Sutherland Asbill & Brennan LLP Baird Holm LLP Suite 2300 1500 Woodmen Tower 999 Peachtree Street, N.E. 1700 Farnam Street Atlanta, GA 30309 Omaha, NE 68102 Jere D. McGaffey, Esquire George G. Yearsich, Esquire Foley & Lardner LLP Morgan, Lewis & Bockius LLP 777 East Wisconsin Avenue 1111 Pennsylvania Avenue, NW Milwaukee, WI 53202 Washington, DC 20004 Denise Olrich, Esquire Welch & Olrich, LLP 809 Petaluma Boulevard, North Petaluma, CA 94952-2108 Please go to www.ali-aba/CR012 for biographical information about this faculty xv 2